Which of the Following Statements Is FALSE

question 62

Multiple Choice

Which of the following statements is FALSE?

• A) One application of MM Proposition I is the useful device known as the market value balance sheet of the firm.
• B) The market value balance sheet captures the idea that value is created by a firm's choice of assets and investments.
• C) On the market value balance sheet the total value of all securities issued by the firm must equal the total value of the firm's assets.
• D) Investors can alter the leverage choice of the firm to suit their personal tastes either by borrowing and reducing leverage or by holding bonds and adding more leverage.

---

Definitions:

Holding-Period Return

The total return received from holding an asset or portfolio of assets over a period of time, considering both price appreciation and dividends or interest.

Dividend

Payments made by a corporation to its shareholders, usually as a distribution of profits.

Annual Real Rate

The annual rate of return on an investment, adjusted for inflation, indicating the real purchasing power increase over the investment period.

Holding-Period Return

The total return received from holding an asset or portfolio of assets over a specified period, including interest, dividends, and capital gains.